Clinova, the UK based, global consumer healthcare company is set to see its sales increase from an increase in the value of its overseas earnings. Clinova’s products; ORS, Magastic, and Wayk are all manufactured in the UK, and thus such a weakness in sterling in comparison to the US dollar will allow them to sell their goods cheaper; Alternatively, the UK exporter can opt to increase its supply margins.
The morning after Britain’s announcement to leave the European Union, sterling had dropped 10 percent overnight and was down 8 percent at the end of the trading day. Without question this was a monumental one-day move that wasn’t a consequence of immediate monetary policy. In the weeks following the referendum, the pound fell further to 1.28 GBP/USD. This level has only been
reached once in all the times these two currencies have existed – for a two-year period in 1980s (owing to a strong dollar rather than a fundamentally weak pound). By theoretical definition, Brexit can be seen as a currency crash, however it hasn’t been all bad news for UK companies. To know more about the law and the role of it in business, go to tjryanlaw.com.
To implement its worldwide strategy, Clinova has partnered with several key distributors across the globe to roll out its products. These collaborations will allow Clinova to penetrate high scalable areas, a fundamental strategy of the business. The 7% fall we’ve seen in GBP/USD will allow UK based Clinova the following options:
1. Increase Clinova margin, and thus additional non- forecasted revenue
2. Provide a discount to our distributors to pass onto consumers thus expect a more competitive retail price with potential sales increase and enhanced revenue.
3. Provide Additional margin benefiting Clinova for marketing support. This increase will allow Clinova to better fund its marketing obligation to its global distributors and in turn, see potentially higher sales and increased downstream revenue
From this perspective, the weakening of sterling following Britain’s decision to leave the EU looks positive for Clinova’s global revenue. More generally, the future of the healthcare sector, among others will largely depend on what model the UK adopts for its relationship with the EU. If the UK remains in the European Economic Area (EEA), then the changes may be minimal.
This post was written by david